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Enron Mail |
Cc: alan.comnes@enron.com, james.steffes@enron.com, janel.guerrero@enron.com,
joe.hartsoe@enron.com, karen.denne@enron.com, leslie.lawner@enron.com, paul.kaufman@enron.com, richard.shapiro@enron.com, sandra.mccubbin@enron.com, skean@enron.com, susan.mara@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable Bcc: alan.comnes@enron.com, james.steffes@enron.com, janel.guerrero@enron.com, joe.hartsoe@enron.com, karen.denne@enron.com, leslie.lawner@enron.com, paul.kaufman@enron.com, richard.shapiro@enron.com, sandra.mccubbin@enron.com, skean@enron.com, susan.mara@enron.com X-From: Jeff Dasovich X-To: Rob Bradley X-cc: Alan Comnes, James D Steffes, Janel Guerrero, Joe Hartsoe, Karen Denne, Leslie Lawner, Paul Kaufman, Richard Shapiro, Sandra McCubbin, skean@enron.com, Susan J Mara X-bcc: X-Folder: \Steven_Kean_Nov2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf This is a very good synopsis of the gas crimes trials in California. Pleas= e=20 note comments of Assembly Republican John Campbell---perhaps the sole brigh= t=20 spot in the California Legislature... Competing evidence clouds Calif. investigation Prompted in part by the California Public Utilities Commission, the=20 California Assembly has been scrutinizing the role that interstate pipelines have played in the= =20 state=01,s current energy crisis. In the efforts to find a smoking gun, legislators have leane= d=20 heavily on a report prepared by The Brattle Group, a consultancy commissioned by utility= =20 Southern California Edison to dig up evidence of market power abuse. But the state=01,s biggest transporter of gas to California -- El Paso Natu= ral=20 Gas -- is not ready to take the rap. The pipeline has commissioned its own study, which i= t=20 recently presented as evidence that it has not circumvented any laws or regulation. As reported in both the trade press and national media, SoCal Ed and the CP= UC=20 are pointing the finger of blame at El Paso for alleged manipulation of California borde= r=20 prices through affiliate deals and capacity hoarding. And exhibit A in their case against = El=20 Paso is The Brattle Group=01,s study of the California market. Richard Zeiger, a spokesman for Assembly Member Darrell Steinberg, chairman= =20 of the California Assembly Judiciary Committee, told Gas Daily that The Brattle=20 Group=01,s market study proved that the surge in gas prices at the California border was not= =20 caused by normal market forces (GD 4/20). His remarks followed an oversight hearing during= =20 which Assembly members questioned Dynegy and El Paso officials about their involvement in= =20 the California market. El Paso presented a different version of events to the Assembly. In a repor= t=20 presented to legislators, a research group hired by El Paso concluded that a convergence= =20 of factors, not a conspiracy, caused the price run-up. Lukens Consulting Group, a Houston-based consultancy, was retained by El Pa= so=20 to conduct work on several fronts. In its study of the California market, Lukens=20 concluded that the increasing convergence of the gas and electricity businesses was one of the= =20 main culprits in the California gas price imbroglio. Assemblyman John Campbell, a Republican member of the oversight committee,= =20 said he "didn=01,t see any smoking gun" in either report. "We had our committee hearing, and we certainly had a lot on the Brattle=20 Study and a little on the Lukens study. To some degree, I=01,m not sure that the California=20 legislature is the best place to adjudicate the differences between these two studies," Campbell=20 said. "I believe FERC is looking at this situation " and it would seem to me that that=01,s the= =20 appropriate place." Campbell said that the CPUC had been prodding the California legislature to= =20 give support to its claims of market power abuse by pipelines. "It=01,s being pushed=20 basically by the Public Utilities Commission here, which believes that there was collusion" by=20 pipeline companies to push up gas prices in California, he said. The CPUC, Campbell suggested, sought satisfaction before the California=20 assembly when it had failed on the federal level: "There=01,s a concerted effort, not jus= t on=20 natural gas but on other things here in California, for entities and organizations here to point the= =20 finger elsewhere for the problems that we=01,re having in this state and I think you=01,re seein= g some=20 of that with the public utilities commission." Whether either report wins over the public incensed by high natural gas=20 prices is a different matter entirely. In the meanwhile, the dueling California market studies se= em=20 to have taken on a life of their own. The Brattle Group Study, for instance, has become the center of a heavily= =20 litigated effort to force FERC to compel the release of market data by California market=20 participants. Following on a request by SoCal Ed, which said it needed additional data to round out= =20 The Brattle Group report, FERC Chief ALJ Curtis Wagner issued subpoenas to the other three=20 major pipelines that serve the state as well as to Sempra Energy Trading. Several parties resisted FERC=01,s call for market information, saying the= =20 requested data contained commercially sensitive information. FERC allowed the discovery=20 process to move forward but only after attaching strict data protection rules restricting= =20 access to evidence (GD 4/23). Critics of the pipeline industry have already suffered one setback in their= =20 case. The commission recently dismissed the CPUC=01,s claim that El Paso rigged the auction of a= =20 large block of pipeline capacity in favor of affiliate El Paso Merchant Energy. In=20 addressing the California Assembly, representatives of Dynegy said that FERC=01,s recent ruling on th= e=20 California border controversy obviated the need for more investigation. The controversy, however, is far from over. FERC last month also ordered a= =20 hearing into whether El Paso Natural Gas and its affiliates manipulated capacity to driv= e=20 up the price of gas delivered into California (GD 3/29). That hearing is likely to take place= =20 this summer. (RP00- 241, et al.) NH =09Rob Bradley =0904/25/2001 09:13 AM =09=09 =09=09 To: Jeff Dasovich/NA/Enron@Enron =09=09 cc: Alan Comnes/PDX/ECT@ECT, James D Steffes/NA/Enron@Enron, Janel= =20 Guerrero/Corp/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Joe=20 Hartsoe/Corp/Enron@Enron, Karen Denne/Corp/Enron@Enron, Leslie=20 Lawner/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT, Richard=20 Shapiro/NA/Enron@Enron, Sandra McCubbin/NA/Enron@Enron, skean@enron.com,=20 Susan J Mara/NA/Enron@Enron =09=09 Subject: Re: Some Background on California Gas Price Spikes--The Oth= er Side=20 of the Story Here is the Q&A I will give to Ken on this topic, and I invite any=20 improvements: Question: "What is your opinion about the study of the Brattle Group (Dr.= =20 Paul Carpenter) that market power exercised by El Paso and Dynegy exacerbat= ed=20 the natural gas price spike at the California border that contributed to th= e=20 electricity price spike." Answer: "I always discount conspiracy theories when prices rise or fall an= d=20 believe fundamental forces of supply and demand explain prices in this=20 instance. I will say, however, that the transmission grid must be more ope= n=20 and transparent to improve everyone's confidence in the economics behind=20 price formation. Long term contracting in the wholesale commodity market= =20 should also reduce speculation about price manipulation." - Rob =09Jeff Dasovich =09Sent by: Jeff Dasovich =0904/24/2001 06:57 PM =09=09=20 =09=09 To: Richard Shapiro/NA/Enron@Enron, skean@enron.com, James D=20 Steffes/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT, Leslie=20 Lawner/NA/Enron@Enron, Joe Hartsoe/Corp/Enron@ENRON, Rob=20 Bradley/Corp/Enron@ENRON, Janel Guerrero/Corp/Enron@Enron, Karen=20 Denne/Corp/Enron@ENRON, Alan Comnes/PDX/ECT@ECT, Sandra=20 McCubbin/NA/Enron@Enron, Susan J Mara/NA/Enron@ENRON =09=09 cc:=20 =09=09 Subject: Some Background on California Gas Price Spikes--The Other S= ide of=20 the Story Last week, I distributed a presentation that the Brattle Group gave before= =20 the California Inquisition (i.e., legislative gas oversight committee looki= ng=20 into the gas price spikes at the Cal border). =20 The Brattle Group is a consulting firm that Edison has long used to beat up= =20 on SoCalGas (recall that Edison used to be a big gas customer when it owned= =20 power plants). Edison "arranged" for the Brattle Group to be the star=20 witness at the Cal Leg gas hearing. Their job was to set up El Paso and=20 Dynegy for the hit at hearings that took place the following day. Their=20 message was simple (and simplistic): El Paso and Dynegy have market power. They have used the market power to drive up basis and thus the price of gas= =20 at the border (to "obscene" levels). That, in turn, has driven up electricity prices. Ken Lay is giving a gas talk tomorrow, and Rob Bradley asked that I provide= =20 the alternative view to the Edison/Brattle rant, in the event that he gets= =20 any questions on the topic. It's attached. Apologies, it's quick and dirt= y,=20 but it provides the basics. Obviously no need for us to defend El Paso or Dynegy, but might be useful t= o=20 offer a more rationale explanation than the one that the California=20 Legislature is peddling. Finally, we were also fingered somewhat as culprits at the hearing (the=20 California PUC FERC lawyer claimed that ENA and TW colluded to drive up bas= is=20 when ENA controlled a portion of the capacity), but the overriding goal of= =20 the hearing was to go after EP and Dynegy. Best, Jeff
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